Acura Pharmaceuticals Inc. (ACUR) filed Quarterly Report for the period ended 2009-03-31.
Halsey Drug Company Inc. is engaged in the manufacture sale and distribution of generic drugs. A generic drug is the chemical and therapeutic equivalent of a brand-name drug for which patent protection has expired. The company sells its generic drug products under its Halsey label and under private-label arrangements with drugstore chains and drug wholesalers. Acura Pharmaceuticals Inc. has a market cap of $296.6 million; its shares were traded at around $6.94 with a P/E ratio of 14.5 and P/S ratio of 6.8.
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As of March 31, 2009, we had received aggregate payments of $55.4 million from King, consisting of a $30.0 million non-refundable upfront cash payment, $14.4 million in reimbursed research and development expenses relating to Acurox® Tablets, $6.0 million in fees relating to King s exercise of its option to license an undisclosed opioid analgesic tablet product and Vycavert™ Tablets, and a $5.0 million milestone fee for successful achievement of the primary endpoints for our pivotal Phase III clinical study for Acurox® Tablets. The King Agreement provides for King to pay us: (a) a $3.0 million option exercise fee for each future opioid product candidate King licenses, (b) up to $23 million in regulatory milestone payments for each King licensed product candidate, including Acurox® Tablets, across specific countries in the King Territory, and (c) a one-time $50 million sales milestone payment upon the first attainment of an aggregate of $750 million in net sales of all of our licensed products combined in all King Territories. In addition, for sales occurring following the one year anniversary of the first commercial sale of the first licensed product sold, King will pay us a royalty at one of 6 rates ranging from 5% to 25% based on the level of combined annual net sales for all products licensed by us to King in all King Territories, with the highest applicable royalty rate applied to such combined annual sales. No minimum annual fees are payable by either party under the King Agreement.
In December, 2007, we and King Research and Development Inc., ("King") closed a License, Development and Commercialization Agreement (the “King Agreement”) to develop and commercialize certain opioid analgesic products utilizing our proprietary Aversion® Technology in the United States, Canada and Mexico. During the three months ended March 31, 2009, we recognized revenues of $1.3 million of the $30.0 million upfront cash payment received from King in December 2007 and recognized $0.1 million of revenues for reimbursement by King of our Acurox® Tablet development expenses. We have yet to generate any royalty revenues from product sales. We expect to rely on our current cash resources and additional payments that may be made under the King Agreement and under similar license agreements with other pharmaceutical company partners, of which there can be no assurance, in funding our continued operations. Our cash requirements for operating activities may increase in the future as we continue to conduct pre-clinical studies and clinical trials for our product candidates, maintain, defend, if necessary and expand the scope of our intellectual property, hire additional personnel, or invest in other areas.
King paid us a $30.0 million upfront fee in connection with the closing of the King Agreement in December 2007. Revenue recognized in the three month periods ended March 31, 2009 and 2008 from amortization of this upfront fee was $1.3 million and $13.7 million, respectively. We have assigned a portion of the program fee revenue to each of three product candidates identified under the King Agreement and expect to recognize the remainder of the program fee revenue ratably over our estimate of the development period for each of these product candidates identified in the King Agreement. We currently estimate the development period to extend through November, 2009.
Collaboration revenue recognized in the three month periods ended March 31, 2009 and 2008 was $0.1 million and $3.4 million for billed reimbursement of our Acurox® Tablet development expenses incurred pursuant to the King Agreement. We invoice King in arrears on a calendar quarter basis for our reimbursable development expenses under the King Agreement. We expect the amount and timing of collaboration revenue to fluctuate in relation to the amount and timing of the underlying research and development expenses.
Marketing expenses during the three month periods ended March 31, 2009 and 2008 consisted of Aversion® Technology primary market data research studies. Our general and administrative expenses primarily consisted of legal, audit and other professional fees, corporate insurance, and payroll. Included in the 2009 and 2008 results are non-cash stock-based compensation charges of $1.3 million and $0.1 million, respectively. Excluding the stock-based compensation expense, there is a $0.4 million increase in general, administrative and marketing expenses primarily in areas such as $0.1 million for patent legal services, $0.1 million for state franchise taxes and $0.2 million for incentive compensation accruals.
At March 31, 2009, the Company had unrestricted cash and cash equivalents of $37.0 million compared to $35.4 million in cash, cash equivalents and short-term investments at December 31, 2008. The Company had working capital of $36.3 million at March 31, 2009 compared to $36.0 million at December 31, 2008. The increase in our cash position of $1.6 million is primarily due to the collection of our collaboration revenue receivable during the three month period ending March 31, 2009. Cash flows generated in operating activities were $1.6 million for the three month period ended March 31, 2009 primarily representing the collection of the collaboration revenue receivable offset by the period s net loss adjusted for certain non cash items such as deferred program fee revenue, deferred income taxes, and charges for stock compensation. Cash flow used in operating activities for the three month period ended March 31, 2008 primarily represented our recognition of deferred program fee revenue offset by the period s net income and change in deferred income taxes. The cash flow from investing activities resulted from the maturity of our short term investments during the 2009 period and the purchase of short term investments for the 2008 period.
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